Argentina: Labor Costs In Argentina

Labor costs in Argentina are one of the key issues foreign
investors should carefully review when doing business in our
country. Following, we will break down the current costs of holding
and terminating a labor relationship in Argentina.

1. Salaries

Workers in Argentina must earn at least the minimum salaries set
forth by the collective bargaining agreement applicable to their
particular relationships. Irrespective of the above, under
Argentina´s labor public policies, there is a minimum salary,
mandatorily established by the Federal Government. As of September
2016, the minimum salary is AR$ 7,560 per month and AR$ 37.80 per
hour (Resolution Number 2/2016 of the National Council of
Employment, Productivity and Minimum Living Wage)

Workers are also entitled to an additional yearly bonus
(aguinaldo), to be paid in two installments (June
30th and December 18th). Every installment is equivalent to
50 percent of the highest monthly salary earned during the relevant
six-month period (Contract of Employment Law Number 20,744,
Articles 121 through 123).

Employees´ salaries are subject to income tax, with
certain non-taxable minimum (varying according to the existence of
family charges) and special deductions (Income Tax Law Number
20,628, text ordered by Decree Number 649/97 as amended by the
Emergency Decree Number 394/2016).

Except for directors and managers, the maximum legal working
week is 9 daily hours and 48 weekly hours (Law Number 11,544 of
Working Hours, as amended by Law Number 26,597). Services rendered
more than the maximum shift must be paid as overtime, with a 50
percent increase for hours performed on regular nosiness days and a
100 percent over rate on Saturdays after 1:00 pm, Sundays and
official holidays.

2. Payroll taxes

Employers and employees have mandatory contributions to support
social security regimes (Law Number 24,241 of the Argentine
Integrated Pension System; Law Number 19,032 of the National
Institute of Social Services for Retirees and Pensioners; Law
Number 24,714 of the National Regime of Family Allowances; Law
Number 24,013 of the National Employment Fund; Law Number 23,661 of
the National Regime of Healthcare Insurance; and Law Number 23,660
of the National Regime of Welfare Entities).

Employer's contributions have a general rate of 23%.
However, if the employer's principal activity consists in the
provision of services or commercial activities and its sales exceed
certain amounts that are periodically adjusted (currently AR$
48,000,000), a 27% rate will apply. Special promotion regimes may
apply lowering certain contributions.

Fuel tax may be set off against employer´s contribution in
certain activities. Depending on the local jurisdiction the
employer does business in, the payment of the social security
contribution may grant a percentage point tax credit to set off
against the Value Added Tax.

Employees' contributions amount to 17%. Regarding
employee's contribution, the base to calculate them has a cap
of AR$ 63.995,73 (Resolution Number 298/2016 of the National
Administration of Social Security).

Additionally and according to collective bargaining agreements,
there may also be contributions for the relevant union, ranging
from 1% to 2.5%

However, under Argentine law, it is possible to grant workers
certain so-called social benefits exempted from social security
contributions, such as food services, reimbursements of medical,
dental and drug expenses for the employees and their families,
supply of working apparel and elements, reimbursement of daycare
expenses for children up to the age of six years, school supplies
for children, granted at the beginning of the school year, payments
of training and specialization courses or seminars and payment of
burial expenses of family members in charge of the employees
(Contract of Employment Law Number 20,744, Article 103
bis).

Foreign employees working in Argentina might be exempt from
making social security contributions under certain international
treaties in force.

3. Collective life insurance

Employers must pay a collective life insurance policy for the
benefit of their employees. As from May 2016, the insurance premium
amounts to AR$ 6.83 per employee per month (Decree Number 1567/74
and Resolution Number 39,766/2016 of the National Superintendence
of Insurance). Collective bargaining agreements may establish
mandatory additional coverage.

4. Vacations and other leaves of absence

Employees are entitled to annual paid holidays, ranging from 14
to 35 calendar days each year depending on their seniority
(Contract of Employment Law Number 20,744, Article 150 and
following). Employers must pay employees, at the beginning of the
relevant period, the "holiday plus," which represents
between a 10 and a 20 percent monthly overpay depending on the
extension of the holiday period.

In addition, employees are entitled to get paid leaves of
absence in cases of marriage, birth, death of a close relative and
high school or university examinations (Contract of Employment Law
Number 20,744, Article 158) and other circumstances also
established by the applicable collective bargaining agreement.

Female employees enjoy a maternity leave of 45 days before and
45 days after childbirth (Contract of Employment Law Number 20,744,
Article 150 and following). During maternity leave, employees are
entitled to certain family allowances supported by the social
security system.

5. Illnesses and accidents

In cases of inability to work due to illness or accidents which
are non-work related (Contract of Employment Law Number 20,744,
Articles 208 through 213), employees have the right to get their
salaries for a period which may vary from 3 to 12 months, depending
on the number of years they have worked for and the existence of a
dependent family.

When it comes to accidents related to work (including those
suffered while commuting) and professional diseases, under Law
Number 24,557 of Work Risks, the employer must pay a work risks
insurance, whose monthly premium depends on the risk of each
activity but is usually around 3% of the payroll,

6. Termination of the contract of employment

All labor contracts entered into for an indefinite period have
an initial trial period of three months (Contract of Employment Law
Number 20,744, Article 92 bis), during which any party may
terminate the relationship at any time without any compensation
due. However, the terminating party is obliged to give a
fifteen-day prior notice.

After the trial period has expired, dismissals without just
cause hold employers liable for a severance payment based on the
employee' s seniority and equivalent to one monthly salary for
each year of employment or fraction higher than three months
(Contract of Employment Law Number 20,744, Article 245). The salary
to be used for the calculation must be the highest ordinary monthly
salary earned during the previous year of employment (or full term
of service, if shorter than one year). Despite the fact that
certain caps resulting from statute and case law may apply on the
calculation basis, in any event, the severance payment cannot be
lower than once the ordinary highest monthly salary. According to
the Contract of Employment Law, the monthly salary to calculate
severance payment may not be higher than three times the average of
the total remuneration set in the applicable collective bargaining
agreement (Article 245). However, pursuant to the Supreme Court of
Justice of the Nation´s case law, the statutory ceiling may
not reduce the employee's highest salary by more than 33%.

Employers must also give employees a prior notice of termination
(Contract of Employment Law Number 20,744, Articles 231 through
239) equivalent to one monthly salary (if the period of service has
been less than five years) or two monthly salaries (if the period
of service has been more than five years). When employment is
terminated without notice, payment in lieu of notice must be made
to the employee amounting to the salary the employee would have
been entitled to during the notice period. Further, if the
dismissal is effective on a day other than the last day of the
month, the employee will also collect an amount equal to the salary
for the remaining days of such month.

The proportion of the yearly bonus and vacation days accrued
during the relevant period must also be paid.

In case of death of the employee, certain relatives have right
to a compensation amounting half the compensation based on
seniority (Contract of Employment Law Number 20,744, Article 248
and following).

There are additional severance payments to be made in the case
of dismissals without cause of pregnant women and newly married
employees equal to one year of their salary, plus yearly bonus
(Contract of Employment Law Number 20,744, Articles 177 through
182).

Union representatives have a special protection and may not be
terminated at will, even if there are enough grounds for dismissal
for just cause. In this latter case, a particular procedure before
the labor court has to be previously followed to get a judicial
authorization to perform the layoff. Failing to appear before a
labor judge asking for the protection be lifted, the union
representative wrongfully terminated may choose between being
reinstated to the position or being paid with the mandatory
severance payment according to seniority, an additional
compensations equal to the total salary he would have received up
to the end of the representation period, plus one additional year
(Law Number 23,551 of Union Associations, Article Number 52).

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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On July 13, 2017, the Brazilian Presidency sanctioned the Bill No. 6.787/2016, authored by the Federal Chamber of Deputies, which makes several changes to the Brazilian Labor Code ("Consolidação das Leis do Trabalho" or "CLT").

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